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Cap to affect family homes development

Government plans to increase the cap on benefits further could prevent housing associations from building family homes.

Treasury sources confirmed chancellor George Osborne is mulling reducing the cap on benefits rolled out nationally this week from £26,000 a year to £20,000 a year, if the policy successfully increases employment and cuts the welfare bill.

Sam Lister, policy and practice officer at the Chartered Institute of Housing, said: ‘The main concern for landlords, particularly those around the London area, is whether they can develop large family homes.

‘In the long run you could have a severe shortage of that type of property, and that drives the rents up for everyone.

‘I guess in the long term you would be looking at there not being any accommodation in these areas suitable for large families, and people migrating outwards.

‘Lenders want to know their income stream is secure and they want to know if there is a risk. And if they won’t lend, then housing associations can’t provide these homes.’

Brendan Sarsfield, chief executive of Family Mosaic, said: ‘When the cap came in [to four boroughs in April] we stopped developing four-bed units.

‘We had a very large number of them already, and we didn’t want to increase our exposure to rent arrears.

‘If [the cap] goes down to £20,000 it calls into question whether three-bed units will be viable. At the moment housing is dictated by benefit policy, and we desperately need a housing strategy.’

October last year I proposed the systemic flaw in the benefit cap (at £26k). which said exactly the same thing.

The systemic flaw is that as rents rise faster than the cap and welfare benefits more an more people will get caught by the cap. In simple terms a couple with 4 children in SRS will be hit by the cap this year in London. In 20 years time this becomes a couple with 2 children. As social landlords have to plan rental income over up to 60 years it means what is the point of developing 3 bedroom homes NOW as they will be inaffordable for those on benefit.

All of the above is made much worse and applies to smaller SRS properties if they have an 'affordable (sic) rent' level set at up to 80% of gross market rent.

A four bed SRS home is not a viable option anywhere in the UK let alone London NOW with the £26k cap and with a £20k cap a 2 bed property is not viable within 20 years in London and 30 years in the provinces.

The cap policy is superficial political dogma that doesnt work economically and will cost the public purse more, that is the direct opposite of what it claims to set out to achieve and what it is hyped and spun to achieve by this coalition.

If social landlords response to that is naive enough to build 3 bed houses now then they are being ignorant of what the numbers say. Even if these social landlords only imagine working tenants occupying them, the minute they lose a job and move onto benefits these tenants will be made homeless due to arrears build up and mean greater financial risk to social landlords of that. To even contemplate building 3 bed or higher sized properties now is economic madness for the social landlord

At the risk of complete exasperation, this is exactly what happens when you slash capital grant rates for building. Labour are absolutely as guilty of this as the Tories are.

Slashing grant rates simply means increased borrowings and higher rents, and the answer is not to penalise the poorest, it is to return to more sensible capital grant rates in the first place. It took us a while in Scotland to realise this but we are finally going in the right direction - abolishing RTB and increasing grant rates (albeit modestly and more requires to be done). I only hope the rest of the UK does the same.